Tag Archive | "new vehicle sales"

Business Leaders Cautiously Optimistic About Trump, Economic, Auto Sales


ALPHARETTA, Ga. — Twenty senior industry leaders expressed cautious optimism about the economy and the automotive retail industry in White Clarke Group’s annual U.S. Auto and Equipment Survey.

The chief executive officers, directors, chairmen and president surveyed by the technology firm were optimistic about new-vehicle sales, which are on the decline but should remain among the highest on record in 2017. What has them cautious is President Donald Trump, whose communication style has them wondering if his administration can deliver on its pro-business campaign promises.

“As a result, business is falling back into cautious and hesitant state,” said Pacific Rim Capital CEO David Mirsky, noting the economic outlook was favorable following the November election. “The coarseness of our President’s communication style hasn’t helped. Even though most businesses agree with a lot of what Mr. Trump wants to do, we don’t like the way he has operated so far.”

According to the National Automobile Dealers Association, new-vehicle sales should end the year at 17.1 million units. During the first six months of 2017, the report noted, 8.4 million new cars and light trucks were sold. That’s down 2.2% from the year-ago period. Despite the decline in vehicle purchases, economic experts remain optimistic about the market.

One of the reasons is the $1.1 trillion auto finance market, which has fueled the industry’s rebound from the financial crash and recession of 2008-2009. Since then, U.S. light vehicle sales have delivered seven consecutive annual gains — the longest upward streak in decades, with sales peaking at 17.55 million new-vehicle registrations in 2016.

The concern, however, is affordability. According to Experian, the average finance amount for a new vehicle reached a record $30,621 in 2016, while the average finance amount for used also achieved new peaks at $19,329 per car. And in order to lower monthly payments, consumers are extending loan terms. In the fourth quarter of 2016, for instance, the 73- to 84-month term band rose 29% from the prior-year period.

“With the average loan amount for new and used vehicles hitting all-time highs, we are seeing the need for affordability drive consumer purchasing behavior,” said Melinda Zabritski, senior director of automotive finance for Experian Automotive. “Our latest research shows an $11,000 gap between the average loan amount on a new and used vehicle — the widest we have ever seen.”

Then there are hurricanes Harvey and Irma, which market analysts are still assessing but are believed to have damaged up to 1 million vehicles — 300,000 to 500,000 in the Houston area alone. This, analysts said in the report, could lead to a substantial increase in demand for new vehicles. It may also help with the oversupply problem in the used-vehicle space, which remains robust.

As for the U.S. economy, the report noted it grew at an annualized rate of 2.6% during the second quarter, with some financial institutions, such as Goldman Sachs, estimating it grew 3%. On the global stage, the International Monetary Fund and the Organization for Economic Cooperation and Development predicted that the global economy will expand by 3.5% this year.

The report also looked at regulatory threats, specifically those posed by the Consumer Financial Protection Bureau. Since opening its doors in 2011, the regulator, which oversees banks, credit card companies, and lenders, has returned about $12 billion in restitution to almost 30 million Americans. If Trump delivers on his promise of less regulation, however, the bureau faces a reduced role in 2018, the report noted.

The report touched on several other topics, including the impact of mobility on ownership models, the equipment finance market, new technology, and the impact of rising interest rates. However, most economic outlooks seemed to rest on the ability of a Republican White House and Republican Congress to deliver on their pro-business promises.

“It’s becoming clearer now that there is dysfunction in the White House and the Republican Party is fractured, so all early attempts to pass meaningful economic legislation have failed,” said Adam Warner, president of Key Equipment Finance. “Business confidence has eroded and will likely continue to be challenged in 2018.”

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S&P/Experian: Auto Default Rate Registers Largest Increase Since December 2011


NEW YORK — Auto loan defaults in increased nine basis points from July to August, the largest month-over-month increase since December 2011, according to the S&P/Experian Consumer Credit Default Indices.

Despite the drop, the auto loan default rate remains low relative to historical levels. In fact, the rate is closer to levels recorded one year ago. The same is true for the composite rate for overall consumer defaults and first mortgage defaults, both of which increased three basis points from July.

“Overall, consumer credit defaults show no reason for alarm,” said David M. Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices. “Defaults on first mortgages are flat to down while defaults on auto loans have risen slightly in recent months. Consumer credit defaults on bank cards continue their upward creep since the end of 2015 despite a recent drop. The combination of an improving labor market, low inflation, and low interest rates are the principal factors behind currently favorable consumer credit conditions.”

The bank card default rate fell 12 basis points from July to 3.19% — the lowest level since December 2016. Bank cards were the only loan type to register a decrease in August.

Out of the five major cities analyzed by S&P/Experian, three registered increases in their default rates in August. New York recorded the largest increase, up 13 basis points from July to 0.95%. Los Angeles reported a rate of 0.66% for August, up three basis points from the previous month. Chicago came in at 0.94%, up four basis points from July.

Dallas reported a decrease of three basis points from the previous month to 0.74%, while Miami’s rate fell 10 basis points from July to 1.13%.

“Some future developments could affect consumer credit defaults: Auto sales have fallen since December 2016 and are down 11%. Declining auto sales and the normal end-of-model year push to make room for new cars may encourage easier credit conditions and raise concerns about future defaults,” Blitzer noted. “Hurricane damage in Houston and across Florida is creating substantial financial stress. The impact on mortgages on damaged or destroyed homes is not yet clear. Job losses and rising spending needs could lead to increased consumer credit defaults in coming months.”

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Average Transaction Price Rises in January


IRVINE, Calif. — The average transaction for a new vehicle increased by $1,123, or 3.3%, from a year ago to $34,968, according to Kelley Blue Book estimates. The average, however, was down by $453, or 1.3%, from December 2016.

Driving the year-over-year strength in pricing was a sales mix in favor of utility vehicles, with the Detroit Three among the greatest beneficiaries, the vehicle information site said.

“The changing mix of sales in favor of utility vehicles is the primary driver for the year-over-year strength, as average prices in SUV segments climbed modestly, while the prices of subcompact SUVs declined,” said Tim Fleming, analyst for Kelley Blue Book. “Demand for subcompact SUVs, one of the hottest segments in 2016, appears to be slowing down, although new models from Ford, Nissan and Toyota could help spark interest in the segment.”

The Detroit Three continue to perform well with some of the greatest year-over-year increases. In particular, General Motors climbed 4% in January 2017, as all of its brands reported increases in transaction prices. Cadillac had the greatest gain at 7%, thanks to the new CT6 sedan and XT5 crossover.  Chevrolet rose 3%, with the new generation Camaro showing the most improvement, up 10% year-over-year.  GMC increased 5% on a strong mix of its full-size SUVs, the Yukon and Yukon XL.

Nissan North America also continues to show gains in average transaction price, which was up 5% for January 2017. A sales mix in favor of SUVs and trucks is partially responsible, as well as the new Armada SUV, which recorded an average transaction price increase of 18%. The new Titan also is performing well, up 9%. Infiniti climbed 2% with help from the Q50 (up 9%) and its new lineup of engines, including the 400 horsepower Red Sport trim.

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NADA: 17.4 Million Units Possible for 2017


LOS ANGELES — Noting that the economic outlook is a little less certain than a week ago, the National Automobile Dealers Association’s Steven Szakaly called for a 17.1 million-unit year in 2017. But the NADA’s chief economist said he’ll have a better read by the end of February, beginning of March.

By that time, Szakaly added, the industry could be on pace to sell more than 17.1 million new vehicles. The key will be whether President-elect Donald Trump sticks to his promises of tax reform, increased infrastructure spending, and reducing the regulatory burden in the banking, automotive, and energy sectors.

“These will all be net benefits. The question, of course, is, will these net benefits be outweighed by possible net negatives, which are, of course, the outlook on immigration and the outlook on free trade,” said Szakaly today at an economic briefing ahead of the Los Angeles Auto Show. “At this point, it’s really difficult to determine which set of factors are going to win out.”

As for 2016, Szakaly said new-vehicle sales are on pace for a 17.4 million-unit year with seven weeks remaining. That would be 200,000 units less than 2015’s all-time sales record of 17.5 million units.

The chief economist described the market as stable but not growing, noting that pent-up demand is “effectively spent.” What’s sustaining auto sales momentum is that the overall economic outlook for 2017 remains strong, with projected gross domestic product growth at 2.6%, employment growth between 150,000 to 180,000 per month, and the price for regular-grade gasoline at less than $2 per gallon.

The easing of fuel economy regulations would benefit the economy even more, he added. Rising wages, which have been stagnant in many sectors, would also help. Szakaly said wages have been rising steadily for college-educated workers.

The chief economist listed rising interest rates as a concern, but said that even a 2% increase would add only $30 dollars to a monthly car payment. Currently, he noted, average interest rates are running at 4.8%, with monthly payments averaging between $485 and $500.

“That’s really not much when we think about what most of these vehicles are running and costing,” he said if rates were to rise by 200 basis points. “I think consumers will be able to pay that as we look at least out into 2017. I think what we’re looking at a 50 basis-point rise by the end of 2017.”

Szakaly also listed ever-increasing loan terms and higher vehicle transaction prices as concerns. As for the latter, Szakaly believes higher transaction prices will likely be offset by manufacturer incentives, which he described as “stable at a very high level.”

Incentives, he noted, have reached $3,900, on average, per unit, representing 10.8% of MSRP. The only time the industry has seen incentives that high was in 2008. The problem is high incentives tend to push down used-vehicle prices, which could push down trade-in equity for car buyers.

Szakaly said he also expects new-vehicle dealership to retail 15.3 million used vehicles in 2017, compared to an expected 15.1 million used sales in 2016. The total used-vehicle market will exceed 40 million retail sales in 2017, he added.

“I tend to favor the idea that we will see some significant reforms on the tax side. We will see some fairly large spending in terms of infrastructure, and I think we will see a reduction in the regulatory burden far sooner than we will see the negative consequences in immigration crackdown … reductions in free trade,” Szakaly said of the new administration. “Overall, I believe the second half of 2017 could very well surprise both for gross domestic product growth and for motor vehicles. If all of these policies come to fruition, we could see a year in the 17.3 or 17.4 million [range].”

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NADA to Issue New-Vehicle Sales Forecast for 2017


Steven Szakaly, chief economist of the National Automobile Dealers Association (NADA), will issue a sales forecast for new cars and light trucks for 2017, and provide an economic outlook and identify the key economic factors that will shape auto retailing next year. Szakaly, who has predicted sales of 17.7 million new light vehicles for 2016, will also provide a year-in-review.

Jonathan Banks, vice president of vehicle analysis and analytics for J.D. Power, will discuss both new- and used-vehicle market trends and the key economic conditions affecting auto retailing, as well as how the used-vehicle market is performing in the final quarter of 2016, and how leasing and gasoline prices are affecting the industry.

A Q&A session with members of the media and industry will follow the briefing.

To register, visit www.nada.org/forecast2017. Registrants will receive a call-in number and conference ID.

NADA, founded in 1917, represents nearly 16,500 new-car and -truck dealerships, with both domestic and international franchises.

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New-Vehicle Registrations Return to Prerecession Levels


SCHAUMBURG, Ill. — New-vehicle registration volumes for light-duty vehicles reached the highest point in nine years, with more than 17 million new vehicles registered within the United States between Nov. 1, 2014 and Oct. 31, 2015, according to Experian Automotive.

The highest number of new registration volumes on record was 17.4 million in 2006, while the lowest point was during the Great Recession, when volumes fell to 10.2 million in 2009.

“It’s encouraging to see new registrations return to prerecession levels, with lower interest and higher employment rates driving vehicle demand,” said Brad Smith, Experian’s director of automotive market statistics. “While I’m sure the auto industry would like to continue this growth annually, it is important to continually monitor data trends and economic indicators to identify shifts in demand and adjust business strategies accordingly.”

Experian’s data also revealed a shift in what consumers are buying, with crossover utility vehicles now accounting for nearly 24% of the market this year — up more than 100% from 2006.

“The crossover utility vehicle segment, with popular entries like the Ford Escape, the Honda CR-V, the Chevrolet Equinox and the Toyota RAV4, provides consumers with a nice balance between utilitarian need and fuel economy,” Smith added. “All-wheel drive versions and roof racks provide the recreational sportsman with the fit and function needed for weekend getaways, while the rear hatch makes these vehicles a viable grocery-getter as well.”

The Top Five brands by market share during the reporting period were Ford, Chevrolet, Toyota, Honda and Nissan. They accounted for 54% of the 17 million new-vehicle registrations. By model, the Ford F-150 led the way with a 2.9% share of the market, followed closely by the Chevrolet Silverado 1500 and Toyota Camry with shares of 2.6% and 2.5%, respectively. The Toyota Corolla, Honda CR-V and Honda Accord tied for fourth with shares of 2.1%.

States leading the way in new-vehicle registrations were California (11.8% share), Texas (9.2%), Florida (7.6%), New York (6%), Illinois (4%).

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